To study targeted recombination, a single linear 2-kb fragment of LEU2 DNA was liberated from a chromosomal site within the nucleus of Saccharomyces cerevisiae , by expression of the site-specific HO endonuclease. Gene targeting was scored by gene conversion of a chromosomal leu2 mutant allele by the liberated LEU2 fragment. This occurred at a frequency of only 2 × 10 −4 , despite the fact that nearly all cells successfully repaired, by single-strand annealing, the chromosome break created by liberating the fragment. The frequency of Leu + recombinants was 6- to 25-fold higher in pms1 strains lacking mismatch repair. In 70% of these cases, the colony was sectored for Leu + /Leu − . Similar results were obtained when a 4.1-kb fragment containing adjacent LEU2 and ADE1 genes was liberated, to convert adjacent leu2 and ade1 mutations on the chromosome. These results suggest that a linear fragment is not assimilated into the recipient chromosome by two crossovers each close to the end of the fragment; rather, heteroduplex DNA between the fragment and the chromosome is apparently formed over the entire region, by the assimilation of one of the two strands of the linear duplex DNA. Moreover, the recovery of Leu + transformants is frequently defeated by the cell’s mismatch repair machinery; more than 85% of mismatches in heteroduplex DNA are corrected in favor of the resident, unbroken (mutant) strand.